Mr. Smith pays a monthly base rent of $300 plus 4.5% on gross sales exceeding $80,000 annually. What were his monthly rent payments if his gross sales were $125,000?

Mr. Smith pays a monthly base rent of $300 plus 4.5% on gross sales exceeding $80,000 annually. What were his monthly rent payments if his gross sales were $125,000?

• A. $330.75
• B. $468.75
• C. $600
• D. $768.75

Answer: (B)

To calculate Mr. Smith's total monthly rent payments, start by identifying the fixed and variable components of the rent structure. The base rent is set at $300 per month, which is a straightforward cost. Next, examine the variable rent based on sales. Mr. Smith pays an additional 4.5% on gross sales that exceed $80,000 annually. First, determine the portion of his annual sales that exceeds this threshold: 1. Annual gross sales: $125,000 2. Exceeds threshold: $125,000 - $80,000 = $45,000. Now, calculate the additional rent amount based on this excess. The supplemental payment is 4.5% of the $45,000: 1. Calculate 4.5% of $45,000: - 0.045 × $45,000 = $2,025. Since this amount reflects the annual additional rent, it needs to be converted to a monthly figure by dividing by 12: 1. Monthly additional rent = $2,025 / 12 = $168.75. Finally, combine the fixed base rent with the calculated variable component to determine the total monthly rent: 1. Total monthly rent = Base rent + Variable

To calculate Mr. Smith's total monthly rent payments, start by identifying the fixed and variable components of the rent structure. The base rent is set at $300 per month, which is a straightforward cost.

Next, examine the variable rent based on sales. Mr. Smith pays an additional 4.5% on gross sales that exceed $80,000 annually. First, determine the portion of his annual sales that exceeds this threshold:

1. Annual gross sales: $125,000

2. Exceeds threshold: $125,000 - $80,000 = $45,000.

Now, calculate the additional rent amount based on this excess. The supplemental payment is 4.5% of the $45,000:

1. Calculate 4.5% of $45,000:

• 0.045 × $45,000 = $2,025.

Since this amount reflects the annual additional rent, it needs to be converted to a monthly figure by dividing by 12:

1. Monthly additional rent = $2,025 / 12 = $168.75.

Finally, combine the fixed base rent with the calculated variable component to determine the total monthly rent:

1. Total monthly rent = Base rent + Variable